Tag: education credits

President Obama–through Treasury Secretary Jacob Lew–forced acting IRS commissioner Steven Miller to tender his resignation today following the recent disclosure that the IRS actively and unfairly targeted conservative and Tea Party groups applying for tax exempt status; a gross violation of a government body that is supposed to be above the political fray.

The outrage has now reached a fevered pitch, with the FBI now getting involved with the investigation. While the President and his administration appears to be insulated from the fall out thus far, criminal charges may be forthcoming, with a key person of interest being Lois Lerner who is in charge of the Tax Exempt division of the IRS:

“Lois Lerner lied to me,” said Representative Jim Jordan, Republican of Ohio, who helped initiate the Congressional investigation of the I.R.S.

Ms. Lerner knew of the increased scrutiny given to Tea Party groups since 2010, but told reporters last Friday that she was not aware of any additional scrutiny given to any group and only heard about this through media reports. She along with many other IRS employees are expected to be called in front of congress shortly:

The House Oversight Committee requested five senior I.R.S. officials be made available for interviews by May 20, including the director of rulings and agreements, Holly Paz; a former screening group manager in the exempt-organizations determinations division, John Shafer; and a former advocacy group manager, Joseph Herr.

“Potentially dozens of I.R.S. employees are involved with the original targeting, the failure to correct the problem and the failure to promptly report the truth to Congress and the American people,” said Meghan Snyder, a spokeswoman for Mr. Jordan.

While Mr. Miller–and what is sure to be others–has taken the fall for this scandal, one can’t help but think what involvement if any the previous IRS Commissioner Douglas Shulman had. Mr. Shulman had been commissioner since May 2008, and just recently stepped down last November. He oversaw an aggressive agenda that made some of biggest changes the IRS has seen in decades. While initially lauded, many of these changes have been riddled with delays, errors and met with contempt.

Mr. Shulman was integral in developing and integrating a universal licensing and annual continuing education requirements for professional paid tax preparers. But these requirements were halted by a federal judge right before the 2013 tax season began citing that the IRS did not have the authority to implement these requirements. The IRS appealed part of the decision, but again were overruled. With millions of dollars already spent and industries spawned to provide these paid preparer requirements, it seems like a foregone conclusion that eventually they will go into effect; either by appealing the decision or by going through a body that does have the authority to regulate the industry. Nevertheless, this new scandal will only serve to divert more time & energy away from this project, ultimately leaving the consumer to suffer the most.

Furthermore, Mr. Shulman led the charge in “modernizing” the IRS; particularly the Modernized E-File Program (MeP). With the new MeP, taxpayers would get their refunds in a matter of days, not weeks; all while being kept abreast of their entire filing process with faster updates. The only problem was that it didn’t work. The MeP was put into effect for the 2012 tax season. When it became clear that the MeP was not functioning, it was scrapped, and the IRS was forced to go back to their old E-File program for the remainder of the 2012 tax season. This year (2013) the IRS fully replaced the old program with the MeP, but the tax season was already riddled by delays, due to the last minute fiscal cliff negotiations. At first, the MeP was working as advertised: refunds were being released quicker, and the IRS even claimed you could get updates on refund statuses every 24 hours. But since then its been glitch after glitch, culminating in what has been dubbed the “Education Credit Debacle“, where the IRS allowed hundreds of thousands of tax returns with IRS form 8863 to be filed early causing serious delays. Some of the affected taxpayers could not even get verification that their returns were filed! And the problems haven’t stopped yet. As of the writing of this post, many taxpayers who filed in February & March still have not received their refunds and the IRS is offering no explanation. Last but not least, the new MeP has done next to nothing to combat the explosion of Identity Theft and Fraud that plagued the IRS is recent years.

Once again, it is the hardworking taxpayer that is getting the short end of the stick. If we don’t file our taxes on time, penalties, interest, garnishments, liens, levies, etc. can be and are assessed. But what happens when the IRS does not live up to it’s end of the bargain? As of now, it appears nothing. Supposedly the IRS must pay interest after a certain date if they do not release refunds, but that date is not static. All the IRS has to do (and has done) is send a “document request” like requesting a copy of your W-2s…EVEN THOUGH THE IRS ALREADY HAS ACCESS TO THAT INFORMATION. I have yet to see a taxpayer actually receive interest from the IRS. And the interest rate they supposedly give is far less than what IRS charges us if we are late.

While there is sure to be more to come out from this story, the politicization of it is not good news for anyone. Some politicians have been searching for a scandal ever since Obama took office. So now that they have one, how will it play out to a public so tired of other “scandals”? It’s the “Boy Who Cried Wolf” syndrome. And that is the crux of the problem. While our elected officials have their hearings, while IRS employees start losing their jobs, and the midterm campaign season heats up, average American taxpayers of all stripes, creeds and political affiliations are ultimately the ones that are being ignored.

Do you have an IRS horror story? Share it with us in the comments section.

Every year, taxpayers forfeit more than one billion dollars of their money to the government. Missed tax credits and deductions, choosing the wrong filing status, not filing at all and other errors all keep taxpayers from getting all they are due in tax refunds.

With recent tax law changes and the extension of the payroll tax holiday, taxpayers may wonder how these things affect their 2011 tax returns…

“Marriage, divorce, having a child, even going back to college — these life changes can bring about tax savings,” said Kathy Pickering, executive director of The Tax Institute at H&R Block. “Every year, taxpayers are leaving money on the table by not claiming all of the credits and deductions to which they are entitled.”

Some of those changes taxpayers should take into account impact workers, homeowners, college students and many others. The following tips can help you–the taxpayer–navigate these changes:

1. Payroll tax holiday has been extended for two months — While it doesn’t impact the tax return, it certainly impacts everyday financial decisions. The 2-percent payroll tax holiday, which amounts to a temporary pay raise for many workers, was extended for two months through Feb. 29. Unless Congress extends this tax cut through the rest of 2012, the employees’ portion of Social Security contributions will return to the 2010 amount of 6.2 percent of wages for 160 million workers. This would mean almost a $1,000 decrease in take-home pay for someone earning $50,000 over the full year.

2. Millions may be eligible to claim casualty losses — There were many natural disasters in 2011, including Hurricane Irene, tornadoes in the Midwest and Texas wildfires, resulting in a record-breaking number of federal disaster areas. Claiming a casualty loss as an itemized tax deduction could mean significant tax savings for millions of taxpayers in a federal disaster area. Losses in a federally declared disaster area in 2011 can be claimed on either an amended 2010 return or a 2011 return.

3. Education credit extended — One of the most overlooked credits is the American Opportunity Credit, which was extended through 2012. This credit allows eligible taxpayers to claim up to $2,500 for each of the first four years of college for each student. Through 2012, the Tuition and Fees Deduction provides a reduction in taxable income of up to $4,000, and the Lifetime Learning Creditis worth up to $2,000 per return for post-secondary degree programs. These education benefits cannot be combined for the same student, so taxpayers should choose the one that is most beneficial. Also, with today’s average college graduate having more than $25,000 in student loan debt, they should remember to deduct student loan interest.

4. Energy credits have been reduced — Taxpayers may claim energy-efficiency tax credits for up to 10 percent of the cost of eligible home improvements, but the maximum lifetime credit is now $500 instead of $1,500. If taxpayers already claimed credits equal to or greater than $500 in previous years, then they cannot claim the credit on a 2011 return.

5. Credit for hybrid vehicles has expired — Though the tax credit for hybrid vehicles expired, taxpayers may claim a credit for 2011 for neighborhood vehicles, conversion kits and plug-in electric drive vehicles, such as the Chevy Volt and Nissan Leaf.

6. New cost basis reporting requirements in effect — Beginning this year, the IRS now requires brokers to report the cost basis, as well as the sale of stocks and securities. Use the cost basis reported by the broker to help calculate the amount of capital gains taxes owed on a 2011 return.

7. Adoption credit is fully refundable — The Adoption Credit can be claimed for qualified expenses up to $13,360 for 2011. The IRS will refund any amount of the credit that exceeds the adoptive parents’ tax liability.

8. Tax deadline is April 17 — Because April 15 is a Sunday and Washington, D.C., will observe Emancipation Day on April 16, the deadline to file federal tax returns is April 17. Most deadlines for filing state returns are also April 17; however some states may differ…

Contact R&G Brenner to help you navigate this extraordinarily difficult tax year or call us toll free at (888) APRIL-15. We also offer live video conferencing via Skype from the comfort of your home or office.